Beginners Guide to Life Insurance

Paying insurance premiums often feels similar to washing money down the drain, until you need to collect on the policy. Then you are really glad you had the foresight to get the insurance.

It is time to face the fact that nobody gets out of this game alive. At some point in your life, you die. You won’t care much what happens after you die, but those you leave behind have to deal with your absence.

A number of financial things have to be dealt with after somebody passes away. The following are just a few of the things that need to be considered if you are married and want to be prepared for the worst:

Funeral expenses that can run between $3,000 and $10,000 depending on what you have in mind. Other emergency expenses associated with the funeral, such as last minute travel arrangements for family members.

Paying off the mortgage with life insurance or other inheritance.

Estate taxes (if any), which vary based on the value of your estate and the mix of assets.

Transition costs for those people left behind to cope with your not being there. Believe it or not, some people miss you, and it may take them some time to get over your loss. They may not feel much like working, so the financial cushion gives them some breathing space.

How will your family support itself without you, if you are the primary income earner, or if your contribution is keeping the daily household running.

Paying for child care if you are the one taking care of the kids.

Paying for home nursing if you are someone taking care of another person requiring medical support.

Making sure that your family is financially secure is a critical part of financial planning. I have seen people pass away knowing that those left behind are financially protected. I have also known people who approach their mortality unsure about the financial condition of the ones left behind. The pending feeling of desperation that appears in those with concerns is enough to make you start planning for your death today.

You can offer your loved ones little emotional support after you pass away, but you can plan for their financial support by taking concrete steps today.

It is not necessary that you have life insurance, but it is probably a part of your estate plan unless you have amassed enough of a nest egg that your loved ones can live comfortably without the life insurance.

Life insurance is used as gap insurance, because it provides the money needed to cover the gap between the amount of money needed for your loved ones to live in a financially secure way and the amount of money provided by your estate without the life insurance. Without the gap insurance money, financial hardship could result.

If your estate is large enough to comfortably provide for those left behind, you might not need life insurance. If not, life insurance should be one of your priority financial planning items. Depending upon the size of your estate, the entire amount of life insurance benefit provided by the policy might pass to your heirs on a tax-free basis.

Life insurance comes in different flavors: term and cash life. Each category has its own variations, but the overall goal of the insurance is always the same to ensure that you have enough coverage to handle your final expenses and gap insurance.